Both new and veteran small business owners can benefit from knowing a little more about maximizing deductions and getting a better handle on tax time. Whether you are a small business owner who scrambles every year at tax season to substantiate deductions and report all expenses or you are a small business owner who is organized and ready for tax season time and again, you will appreciate at least one of these six tips for making tax time easier for small business owners.
- Remember Startup Costs
Whether you just entered the sharing economy as a pet sitter,dog walker, or ride-sharing driver, or started a new brick-and-mortar business, there is a good chance you had startup expenses that you can deduct as a small business owner. Be sure you track all beginning expenses, from online courses to technology devices that are now driving your home office. Keep in mind that receipts are better than credit card statements for detailed purchase records and that the more accurate records you have, the better.
- Be Prepared for Tax Time Ahead of Time
One of the best ways small business owners can make tax time easier is to prepare for tax season ahead of time. If you are turning your taxes over to a professional, review your expenses and payroll and have your records ready to deliver to them ahead of time. Or, if you choose to prepare and file your own small business taxes, be sure you track your expenses and income year-round. It may be best to consider a software solution for your taxes, so that all of your records and information are in one place to transfer to your tax software when the time comes.
- Keep Up with Your Tax Estimates
Tax estimates are easy to lose track of, so it’s better for small business owners to be sure they are calculating them correctly and paying them on time. It’s also wise to be aware of the safe harbors that exist if underpayments occur. While it is possible for small business owners to successfully keep up with tax estimates on their own, it may be easier to enlist the help of a professional tax accountant to make tax estimates and tax time easier.
- Keep Track of Purchases Throughout the Year
Small business owners often need to purchase new equipment, technology, software, and more, to keep their business running. To make tax time easier, be sure to save the receipts and keep detailed records of each item purchased, including purchase price and date placed into service. This practice helps small business owners prove expenses claimed on tax returns. It’s also important to educate yourself on the deduction limit for new and used assets purchased each tax year, as they often change.
- Don’t Count Out the Small Things
Small business owners sometimes only count the larger purchases, like those mentioned in tip #4. However, small business purchases made over the course of the year add up quickly, so don’t overlook seemingly minor business expenses. It’s important to have a system in place for collecting and organizing receipts for all small business purchases; these small expenses often lead to big tax savings, as long as small business owners keep adequate records of those small purchases.
- Track and Report Business Meals
Small business owners often network by having business-related lunches. While the rules for reporting business meals are a bit complicated, they are worth knowing so that you can write off legitimate business meals.For example, if you dine with your employees or business partners, 50% of the cost is deductible as long as they are not lavish expenses. Again, using the services of a professional tax preparer may be in a small business owners’ best interests, especially when it comes to tracking and reporting business meals.
Small business owners have a great deal to keep track of and report at tax time. However, knowing some of the best deductions and practices for simplifying tax time can help small business owners a great deal.
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